Adhesion Contract: an insight By: Jayshree Patnaik and Manshi Ever got stuck while purchasing a house, a car or planning a trip due financial stress?Later arched your back before no bargaining, no negotiating terms to fulfil suchmaterialistic needs and end up descending to debt traps. While online we tend toquickly click on “I agree” without reading the terms. These were examples of howadhesion contracts are forced on us.I am unsure about which of the either terms came into existence first, adhesion contractor bandhwa majduri (bonded labour). Bonded labour indeed was an adhesion contractslapped on to the labourers’ face, the labourers lost their freedom and worked for amaster (moneylenders) in exchange for debt repayment. Though bonded labour wasabolished, adhesion contracts have a long lifespan. What is an Adhesion Contract? An adhesion contract is a legal agreement that is drafted by one party, in the absence ofthe other party. This means that the party signing the agreement had no chance tobargain for the agreement’s terms. Although the other party may or may not sign it. Boththe parties stand at different poles when it comes to bargaining power. These contractsplay a role in consumer transactions. Some of the sectors where such contracts arewidely used are insurance sectors, loan documents (car loans, personal loans on apps,etc.), license agreements during app installations, medical consent forms, leases/rentalagreements and the list goes on as these contracts are used daily by vendors,distributors, etc. People end up signing the “fine print” contracts where there isdisclosure, but is hidden. In digital space, adhesion contracts come in the form ofclickwrap and browsewrap agreements. The Consumer Protection Act, 2019 safeguardsconsumers to challenge exploitative terms of adhesion contracts, this act empowersConsumer Disputes Redressal Commission to address such grievances. Adhesioncontracts can also be challenged on grounds of undue influence (Section 16, IndianContract Act, 1872) and provisions on free consent (Section 14).Characteristics:Standardized Terms: The terms and conditions are pre-written and presented as a takeit or leave it contract.Lack of Negotiation: The party adhering to the contract has limited or no ability tonegotiate the terms.Unequal Bargaining Power: One party typically has significantly more bargaining powerthan the other. History of adhesion contracts Adhesion contracts have been around for centuries and were first formalized in Frenchcivil law. They entered American law through a Harvard Law Review article in 1919.This concept helped American courts understand when contracts of adhesion should beenforced and when they should not.Most American courts have adopted the concept of an adhesion contract in varyingways. While many courts scrutinize them closely, their increasing use has significantlychanged this area of American jurisprudence. Adhesion contracts have grown inpopularity and use throughout the 20th and 21st centuries. This is especially truebecause of the rise of digital contracts and “click-through” agreements.The legality of adhesion contracts has changed significantly over time and continues toevolve. It is now generally agreed that adhesion contracts may be enforceable whenproperly formulated and managed. Courts have often considered the bargaining powerof the parties in relation to the benefit the signee gets from the agreement.Other courts look to the terms themselves for a determination of “unconscionability” andreasonableness.Contract RegulationAdhesion contracts are usually enforceable in the United States according to theUniform Commercial Code (UCC). The UCC helps to ensure that commercialtransactions take place under a similar set of laws across the country.Although the UCC is followed by most U.S. states, it has not been fully adopted bysome jurisdictions such as American Samoa and Puerto Rico.Louisiana stands alone among the 50 states in adopting only parts of the UCC.The UCC has specific provisions relating to adhesion contracts for the sale or lease ofgoods. Contracts of adhesion are, however, subject to additional scrutiny andinterpretation under state law. Pros and Cons Pros: Saves time and resources for both parties- as there is no need to customizeagreements for individual consumers, an uniform agreement is used for unlimited endusers. Also, adhesion contracts are called boilerplate contracts because they are neverchanged leaving no room for negotiation, thus saving time. Cons: As adhesion contracts are drafted by the dominant party, unilateral decision making isinvolved and has unfair terms for the signing party: adhesion contracts never allownegotiation, creating an imbalance of power between the two parties.The non-drafting party is often exploited entering such contracts.May restrict the end users from seeking legal recourse: the signatories are bound by thecontract and have little or no options to look around for dispute resolution. Legal Principles Governing Adhesion Contracts: Adhesion contracts that are against public policy are considered void, as well as suchcontracts must not violate Article 14 of the constitution. Following are the other doctrinesthat govern such contracts. Contra proferentem and Unconscionability to therescue The contra proferentem can be applied to any contracts, as per UTCA (Unfair ContractsTerms Act 1977). This doctrine, which originated from insurance contracts, states thatwhen a contract provision can be interpreted in more than one way, the court will preferthe interpretation which is more favourable to the party who has not drafted the contract.However, its effectiveness relies on genuine ambiguities, it cannot protect a party forunderstood contracts.The doctrine of unconscionability allows courts to refuse to enforce a contract if thecontract is deemed grossly unfair to one party. The courts may look at judicial precedentwhen determining enforceability. Are we changing the narrative? Recently, the government passed a bill to curb the increasing case pendency related tosuch contracts. In December 2024 the Banning of Unregulated Lending Activities (BULA) bill wasproposed by the Indian government to ban the unregulated lending activities andsafeguard the borrowers from exploitation. Also, this bill emphasizes on penalizing theunregulated entities with substantial fines and imprisonment of up to 10 years. The CBIis designated to handle the cases. This step will also enhance credibility of thelegitimate lending platforms. The Ministry of Finance has released the draft bill for publicfeedback, and the bill is open for comments and suggestions until February 13, 2025. Types of adhesion contracts There are several forms of adhesion contracts. Most notably, browse-wrap, click-wrap,and sign-in-wrap are three common forms of electronic adhesion contracts.In a paper published by Tulane University, authors Ian Rambarran